CORNYN WINS REFUNDS FOR INSURANCE CONSUMERS

AUSTIN - Texas Attorney General John Cornyn today announced a settlement with
Liberty Mutual Insurance Company for $78,000 in estimated refunds to Texas consumers.
The settlement concerns Liberty Mutual's practice of reducing auto repair claims payments
to its policyholders for "betterment" of the vehicle.

Under the settlement, Liberty Mutual agrees to stop the practice of deducting for betterment
on its policyholders' claims and will refund the amount charged for betterment, plus 10%, to
policyholders who had an auto repair claim from Jan. 1, 1997 to the present. The settlement,
in the form of an Assurance of Voluntary Compliance, was approved today in Travis County
District Court.

"Liberty Mutual is to be commended for its willingness to do what is right for its Texas
policyholders," said Attorney General Cornyn. Liberty Mutual settled without the necessity
of filing suit.

"Betterment" is an insurance industry term for increasing the value of a vehicle by paying to
repair it with better or newer parts. For example, if your engine is damaged in a collision and
your insurance company decides to replace it with a newer engine, some companies deduct an
amount for betterment or depreciation on the claim payment. The standard Texas auto policy
does not allow for such a deduction. Also, a 1998 Austin Court of Appeals opinion and a
recent bulletin by the Texas Department of Insurance states that these deductions are not
permitted.

The settlement requires Liberty Mutual to pay an estimated $78,000 in total restitution to just over 600 Texas consumers. Each consumer will receive an average refund of about
$130. Liberty Mutual also agrees that this settlement will not affect its insurance rates.
Liberty Mutual also will pay $8,000 in attorneys fees and other expenses to the Attorney
General's office. The Assurance of Voluntary Compliance does not require Liberty Mutual to
admit liability or wrongdoing of any kind.

This investigation was handled by Assistant Attorney General Jim Wenzel, in the Insurance
Practices Section of the Attorney General's Office Consumer Protection Division.